Header Bidding 101

Despite huge improvements in efficiency brought forth by programmatic, the advertising ecosystem is still fragmented and in need of more transparency. Advertisers want better, more accurate valuations on publisher inventory, while publishers are working to keep inventory at a premium. But advertising’s newest trend poses solutions that are advantageous to both sides, offering transparency for advertisers, and greater yield for publishers. Header bidding, is a topic that’s received a lot of attention recently—particularly in the B2C space. And though B2B has yet to substantially test the waters, there are some incredible benefits this technology can offer.

What is Header Bidding?

In short, header bidding is a process in which publishers allow multiple advertisers to bid for specific inventory simultaneously. While this may sound similar to your standard real-time bidding (RTB) process, header bidding is unique because advertising is sold per impression. Publishers are able to pre-select their partners who can then place bids on offered inventory. Advertisers favor the impression-based model because it’s inherently more transparent.

Not Just RTB

Most publishers use a “waterfall’strategy when executing RTB. Bidding is tiered, with premium buyers at the top, with unfilled inventory moving downward to lower bids. This process means that publisher inventory is often left unfilled or seeing only pennies on the dollar at best. With header bidding, buyers bid all at once while the page is loading. And because bids are on an impression-level basis, publisher yield drastically increases.

Publishers Stay In Control

For publishers, header bidding offers several key advantages over RTB. First, as mentioned above, inventory pricing is more transparent. Bidding on a per-impression basis helps publishers set a more accurate valuation of their inventory. Second, publishers are able to pre-select their partners—which keep unwanted advertisers out, and minimizes the risk for fraud. It’s been proven that header bidding boosts the value of premium inventory. PubMatic reports that publishers who have implemented a header bidding strategy can see up to a 50% increase in CPMs.

Header bidding is still new to B2B publishers. The trend is largely dominated by Google’s DoubleClick for Publishers (DFP), which operates the largest header bidding platform. DFP uses an open-exchange format that allows publishers to easily implement header bidding through a small amount of code. However, smaller B2B publishers are often reluctant to participate in open exchanges, which is why DFP may not be the best solution for them. Because inventory is sold on an impression-by-impression basis, the auction takes place while the page is loading. In an open exchange with many different bidders, page loading and latency time increase. The more players, and the more tags, the longer the page takes to load. Because private marketplaces (PMPs) have fewer bidders, latency can easily be kept to a minimum—which is why it’s the obvious framework for a successful B2B header bidding strategy. Impression-level bidding opens up small-scale, high-quality inventory which is of tremendous value to advertisers.

Moving Beyond the Header

Ultimately, the model behind header bidding is expected to expand outside its namesake unit. The technology is already being applied in both video and mobile inventory. The appeal of transparency attracts advertisers who have already shown a willingness to pay a premium for high-quality, targeted B2B inventory. However, there are a few key challenges to overcome before we’ll see header bidding go mainstream in the B2B space. For one, many publishers that have experimented with header bidding have seen increased latency times. As mentioned earlier, this is fueled, in large part, by a high volume of bidders. However, it can also be from the code publishers have used to integrate header bidding into their HTML sites. Header bidding technology partners need to do a better job of helping publishers with seamless integration.

In addition, since header bidding allows ad exchanges to bid against each other, advertisers can end up bidding against themselves. This isn’t unique to header bidding, but nonetheless it is a problem worth tackling. Although this artificial bidding would initially drive up prices, advertisers would soon adjust and pull back. A universal Deal ID system, which tracks individual advertisers across multiple platforms, could prevent advertisers from bidding against themselves.

Header bidding is a work in progress. But it’s a process that is gaining momentum as more and more publishers seek new ways to boost their yield. And for B2B publishers whose value lies with the quality of the audience and not the quantity, keeping unfilled inventory to a minimum is critical for success.

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Ronn Levine began his career as a reporter for The Washington Post and has won numerous writing and publications awards since. Most recently, he spent 12 years at the Newspaper Association of America covering a variety of topics before joining SIPA in 2009 and SIIA in 2013 as editorial director…